Reference no: EM131023278
Bill Holliday is not sure what she should do. He can either build a quadplex (i.e., a building with four apartments), build a duplex, gather additional information, or simply do nothing. If he gathers additional information, the results could be either favorable or unfavorable, but it would cost him $3,000 to gather the information. Bill believes that there is a 50%u201350 chance that the information will be favorable. If the rental market is favorable, Bill will earn $15,000 with the quadplex or $5,000 with the duplex. Bill doesn%u2019t have the financial resources to do both. With an unfavorable rental market, however, Bill could lose $20,000 with the quadplex or $10,000 with the duplex. Without gathering additional information, Bill estimates that the probability of a favorable rental market is 0.7. A favorable report from the study would increase the probability of a favorable rental market to 0.9. Furthermore, an unfavorable report from the additional information would decrease the probability of a favorable rental market to 0.4. Of course, Bill could forget all of these numbers and do nothing. What is your advice to Bill?
Prepare a Managerial Report structured as follows:
2.1 Structure and present your paper in the form of a Managerial Report, with a cover page, table of content, executive summary, main body, appendixes.
2.2 Prepare a payoff table and develop a decision tree.
2.3 Based on the calculated EMVs for all decision alternatives, answer the question: "Should Bill build a duplex, a quadplex, or do nothing"
2.4 Apply software tools for the decision tree (recommended tool: MS Excel Add-Ins TreePlan)
Expected length of Assignment 2: up to 4 pages APA format, excluding cover page, table of content
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